Evening Report (VIP) -- December 19, 2012

December 19, 2012 08:56 AM
 

INFORMA UPDATES ACREAGE PEGS... Sources familiar with Informa Economics say the firm has updated its 2013 acreage projections. The firm has reportedly increased its corn acreage projection from its November figures at the expense of soybeans. Following are the details:

  • Corn: Informa now sees the potential for 99.026 million planted corn acres in 2013, which is up from its November estimate of 97.7 million. That compares to 96.946 million planted in 2012.
  • Soybeans: Informa estimates planted soybean acreage of 78.962 million in 2013, which compares to its November estimate of 80.1 million. But if realized, it would still be up from 77.203 million planted in 2012.
  • Winter wheat: Informa estimates planted winter wheat acreage at 42.198 million in 2013, which compares to its November estimate of 42.5 million. This is still higher than 41.324 million planted in 2012. Informa also reportedly pegged all wheat acreage at 56.8 million, which is up 1 million acres from last year.
  • Cotton: Informa now sees planted cotton acreage of 10.065 million in 2013, which is up just 275,000 acres from its November estimate. This compares to 12.121 million planted in 2012.

 

LIMITED TRAFFIC ON MISSISSIPPI RIVER DURING ROCK EXCAVATION... A spokesman for the U.S. Coast Guard yesterday reported that as the U.S. Army Corps of Engineers works to remove river bottom rock from the Mississippi River that poses a threat to river traffic at current low water level, the Coast Guard is closing the river to barge traffic for 16 hours each day for the next 30 to 45 days.

 

2013 TIMELINE FOR NEW FARM BILL HAS BASELINE IMPLICATIONS... In "First Thing Today" we reported that most expect the new farm bill to be punted to 2013 -- regardless of whether it's used as a budget savings number as part of any fiscal cliff package. Moving the farm bill into 2013 could bring some budget issues if a new baseline from the Congressional Budget Office (CBO) coming in March is used instead of the current budget baseline.

The National Corn Growers Association earlier this week in a note to its members wrote, "... delaying action on a five-year farm bill will result in Budget Act scoring using a new January Congressional Budget Office (CBO) spending baseline, one that will reflect new price estimates well above March 2012 estimates of $4.96 for corn and $11.00 for soybeans. Along with raising the cost of revenue-based commodity programs tied to the five-year Olympic Average Price that sets the revenue guarantee, the delay increases the probability for cuts in crop insurance premium subsidies as the Congress and president look for alternative budget offsets to reduce across-the-board cuts to defense spending as required by the Sequestration Act of 2011." Get more details about the likely farm bill path.

 

ETHANOL PRODUCTION DOWN FROM LAST WEEK... According to the Energy Information Administration, ethanol production averaged 822,000 barrels per day (b/d), which is down 2,000 b/d from the previous week. The four-week average for ethanol production is at 821,000 b/d for an annualized rate of 12.56 billion gallons. Stocks of ethanol stood at 20.8 million barrels, which is up 4% from the previous week and the highest since the week ended June 22, 2012. Gasoline demand for the week averaged 362 million gallons daily, the highest in a month.

 

PF MIDWEEK MARKETING GAME PLAN UPDATE...

CORN: Hedgers are 100% sold in the cash market, with cash-only marketers 75% priced on 2012-crop. March corn futures violated support at the September low today, which raises the risk of followthrough pressure. As a result, we advise you to get current with advised 2012-crop cash sales. December 2013 corn futures remain above the November low, but if that is violated, we may begin 2013-crop marketings with a light forward contract sale and/or hedge.

BEANS: Hedgers are 100% sold in the cash market, with cash-only marketers 75% priced on 2012-crop. Given recent price pressure, which raises the risk of more near-term price softness, hedgers and cash-only marketers should get current with advised cash sales.

WHEAT: Hedgers and cash-only marketers have 75% of 2012-crop sold in the cash market. Get current with advised sales, but given crop struggles in the Plains and other areas around the world, we don't want to get too aggressive with cash sales. However, if the market posts another leg down, it could encourage more old-crop sales and initial 2013-crop sales.

COTTON: Hedgers and cash-only marketers have 50% of expected 2012-crop production sold in the cash market. With futures moving back to the upper end of the broad, sideways trading range, catch-up on the sales is advised. The likelihood of a sharp drop in cotton acres next year is keeping us from advising 2013-crop sales at this time.

CATTLE: Fed cattle producers should continue to carry all risk in the cash market as supply fundamentals are bullish and demand is holding up relatively well. Feeder cattle buyers and sellers carry all risk in the cash market for now, although feeder cattle buyer should be prepared to hedge a portion of needs as technicals have improved.

HOGS: Pork producers should carry risk in the cash market, as nearby futures appear headed for a another test of the November highs.

FEED: Carry all corn-for-feed and meal risk in the cash market for now. Consider extending your feed needs in the cash market in response to recent price pressure on corn and meal futures.

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